The imminent death of third-party cookies: How will it impact digital advertising?

After Apple’s Safari and Mozilla’s Firefox, Google has decided to phase out third-party cookies from its web browser service Chrome starting April with the Chrome 90 roll-out.

Google is testing an alternative to third-party cookies called Federated Learning of Cohorts (FLoC). The tech giant has claimed that FLoC can work as effectively as third-party cookie-based ads.

Third-party cookies allow marketers to collect data about the websites visited by internet users. They are mostly used for retargeting and advertising.

Commenting on the likely impact of Google's move on digital advertising, Xaxis India Country Head Bharat Khatri said that India’s digital ecosystem never had too much reliance on third-party data sets. With low match rates and unverified data sources, the usage and ROI of third-party cookies were always questionable. Also, active AdIDs/IDFAs (Advertising ID/ Identifier for Advertiser) outnumber the unique cookies in India.

“The topic is under different rounds of debate over the past few months, but for a mobile-first market like India, is it really worth the mourn & distraction created by digital marketing gurus?” Khatri noted.

He further stated that serious advertisers with long-term data strategies have already started to deploy CDPs (Customer Data Platforms) to transition from segment audience data approach to individual consumer profiles.

Khatri also pointed out that the Indian market has a variety of cookie-less identity solutions like Zeotap’s ID+, LiveRamp’s IDL, and TTD’s Unified ID. “We will continue to see more companies coming into this space to bring alternative solutions for brands. However, all these solutions still aim to identify people at the individual level and subsequently pass this data through a programmatic bid request pipe.”

He also said that first-party data will become crucial in the absence of third-party data. “Industry will continue to see this trend in both advertiser & publisher ecosystem on putting more focus towards first- party data activation powered with contextual targeting, and personalization based on first-party data.”

Offering his take on the topic, InMobi VP and GM, Growth Marketing Platforms Navin Madhavan said that the death of cookies will have an impact on the digital medium’s ability to offer measurability. He also said that there is a definite short-term impact on ad exchanges on the web/ browser side of things.

“In the absence of targeting and measurement, inaccurate ads lead to lesser performance for advertisers and thus, lesser revenue for publishers. If ad revenues decline, it reduces the means for publishers (website owners) to produce high-quality content as they could previously. There is a possibility that publishers could move into a paywall-first world and subscription becomes the primary means to compensate for ad revenue,” he expounded.

dentsu Vice President (Asia Pacific), Data Sciences Abhinay Bhasin stated that the gradual phase-out of cookies will have an impact on 85% of digital advertising as we know it. Cookies, he said, allowed website owners to get a feel of their visitors and understand their behaviour on site to forge a better brand-audience relationship. Further, this store of information led to the massive growth in online ad revenues for over two decades.

“While the move to remove third-party cookies is celebrated by some, empowering consumers with the right to “consent-based advertising” will in some form have a tremendous impact over nearly 85% of digital advertising as we know today. What this will do is create disruption in the digital advertising ecosystem. However, what this will result in is creating an avenue to re-architect the landscape as we know it to make it more efficient and hopefully transparent,” Bhasin said.

FLoC vs cookies

 FLoC is Google’s Privacy Sandbox initiative which groups individuals into behavioural cohorts using machine learning. This means that the Chrome browser will share an interest category based on browsing history rather than sharing user identity.

According to Khatri, the FLoC approach would allow the user data to remain stored only on their local device, with the machine learning model instructing the browser on which cohorts the user may belong to based on their browsing behaviour.

“Although the details of this behaviour may serve as inputs to an algorithm, only the cohort is exposed to third parties. These cohorts are intended to be large enough (in thousands) that an individual can never identify.

This will help solve both contextual & interest-based advertising needs in a web world. Google will be allowing developers to begin experimenting with FloC in March & will open it to advertisers in Q2. For the moment, it looks like a great move to create more privacy & move towards more consumer-centric experiences,” Khatri averred.

Madhavan noted that FLoC seems to be a new start and the rules are still being laid down by Google, so there isn’t much conclusion to draw at the moment. He also feels that this methodology is likely to work only within the Google ecosystem and thereby further aid the walled gardens rather than enabling uniform identifiers/cookies that can help advertisers target users consistently across the digital ecosystem.

“Overall, this will continue to nudge advertisers from targeting individuals to aggregate cohorts and audiences that they are looking for. But, in the process, it will also reduce the metrics and transparency available to an advertiser during campaign execution,” he added.

Way forward for marketers

Xaxis’ Khatri said that publishers, retailers, and brands increasingly understand that their first-party data is gold. At an agency level, Xaxis has been preparing for this transformation for years, he added.

“We started work on cookie-less AI for programmatic optimisation more than four years ago and our traders are experts in algorithmic A/B testing methodologies that are agnostic to identity-based targeting. We have been active in industry steering committees like the IAB, W3C, and ethical AI groups to push reforms and innovations.”

Echoing Khatri’s sentiments, Madhavan said that brands will now have to start investing in building their own first-party data store to help them make smarter advertising decisions. He further stated that the most effective way to solve this problem is by establishing a data-value exchange.

Brands, Madhavan said, will have to work with partners who can supplement their own first-party data and enrich it with high-quality sources of knowledge and at the same time ensure that the information is collected in a compliant and privacy-minded manner.

“There will be a rise of companies and vendors who will work on consent management and handling first-party data. Either publishers build their own mechanism to bring user data onto their platforms or use such vendors to make sure they can collect first-party data with consent and in a privacy-compliant way. Just like how advertising ecosystem evolved to comply with GDPR and CCPA in developed markets, systems will be ready for changes in India as well,” he predicted.

Bhasin said that a cookie-less future is a huge opportunity for the digital ecosystem. He also pointed out that the birth of General Data Protection Regulation (GDPR) and privacy laws have encouraged the ecosystem to create several consent management frameworks that allow advertisers and brands to build stronger repositories of their customers and to use them effectively to reach their audiences in contextually sensitive ways.

“With the use of ad-tech and its ability to glean insights from “walled gardens” in an anonymized way, marketers, with the right partners, can further enrich their audiences to understand them better and target them more effectively in a privacy compliant fashion,” he added.